Can you match these accounts with the

ledger in which they would be found?

Purchases account An account for
Control accounts Sales account Fred Jones, a
credit supplier
SALES
GENERAL
LEDGER
LEDGER
Bad debts
Presented By account
Cash sales PURCHASE
account LEDGER
Md. Mahedi Hasan Bank loan
BBA (DU), CA Advanced Stage (ICAB under ICAEW Syllabus) account
Sales returns Discount
Deputy Manager (A&C), ACNABIN, Chartered Accountants An account for
account received
account David & Sons, a
credit customer

1 2

What are control accounts? Sales

ledger
T Cash
They are copies in total of all the entries made in the individual T
T T book
sales or purchase ledger accounts. T
T T T
There are separate control accounts for the purchase and sales T
T
ledgers. They are called the sales ledger control account and the T
T T
purchase ledger control account. T T T T
T General
Money received from T T ledger
A sales invoice is T
a credit customer
debited in an T T
credited to an T T
individual sales ledger
individual sales
account. T TT T
ledger account. T T
T
T
T T
The total of all money Petty
The total of all T T
received from credit T cash
sales invoices is
customers is credited to book
debited to the
the sales ledger control Purchase
sales ledger control
account. ledger
account. 3 4

1
 Sales Sales day book
ledger
Cash Date Details Invoice no. Folio Net VAT Total
T
T book
T T T
T T T
T
T
T
T T The total amount of
T T T
T T General each invoice is posted to
T
T T ledger the customer’s a/c as a
T
T
debit
T T T
T
T TT T
T T
T
T
T T
Petty
T T
T cash Totals
book Sales ledger
Purchase Sales VAT control a/c
ledger a/c a/c
5 6
debit
credit
credit

Sales Returns day book Cash receipts book

Date Details Credit No. Folio Net VAT Total Date Details Folio Disc. Cash Bank Sales Cash Inter Misc. Rent VAT
ledger sales est rec’d
2011

Nov 25 G. Loo L002 3.00 50.00 50.00

The total amount of Nov 26 A. Box B010 6.00 99.00 99.00

each credit note is
posted to the 5.73
Nov 27 T.Gether 38.50 32.77
customer’s a/c as a
credit

9.00 50.00 137.50 149.00 38.50

Totals Sales Sales

Sales ledger ledger
Debit
Debit ledger control a/c control a/c
Sales Returns VAT a/c
a/c
control7 a/c Credit Credit 8
Credit

2
 How do they fit into the double entry
Why bother?
system?
There are usually many accounts and postings in the ledgers. It can
be difficult to find mistakes because there are so many entries.
If there were no control accounts, each account in the sales and
purchase ledgers would have a separate entry in the trial balance.
The ledger accounts are either in the purchase ledger, the sales
ledger or the general ledger. Usually most of the accounts are in
However, if we have sales and purchase ledger control accounts, we
the sales and purchase ledgers (the personal ledgers). If we can pin
can replace all the individual personal accounts in the trial balance
an error down to one of these ledgers it will mean we will have less
work to do to find it. with one control account for the purchase ledger and one control
account for the sales ledger.
A control account helps by providing an overall balance which can be
compared with a list of balances of all the individual accounts in But if we debit a sales invoice to a sales ledger account AND to the
that ledger. If there is a difference we will know that it is within sales ledger control account where is the double entry completed?
that ledger and this means we do not have to check the accounts in
The answer is that it isn’t. We can regard all the purchase ledger
the other ledgers.
and sales ledger accounts as memorandum accounts with the double
entries only being made in the control accounts and other accounts
in the general ledger.

9 10

What are the advantages of using What are the disadvantages of using
control accounts? control accounts?
Apart from helping you to find errors they are Some types of error will not be detected.
useful because:
Which ones?
•You can ascertain the total amounts due from
debtors and creditors without having to add them
all up. This means that you can prepare final
accounts quickly.

•You can delegate responsibility for maintaining

the personal ledgers. Provided the control accounts
are prepared by someone other than the persons
maintaining the ledgers, their preparation can be
used as a check on the honesty of the staff. 11 12

3
 What happens when a customer is also
a supplier?
Sometimes we will buy goods from a customer. So we will be both buying
from and selling to the same company. The company will have an account in
the sales ledger and an account in the purchase ledger.

What sometimes then happens is that the customer offsets invoices for
supplies made to the company against invoices for supplies received and
only pays over the net amount.

How do we account for this?

We make a transfer between the sales and purchase ledger accounts.
Usually the entry is to debit the purchase ledger account and credit
the sales ledger account.

The transfer is called a contra. The total value of contras must also
be shown in the purchase and sales ledger control accounts. 13